Ahead of Back to School Season, Consumers Brace for Higher Prices Due to Trump’s Tax and Trade Policies
Ahead of Back to School Season, Consumers Brace for Higher Prices Due to Trump’s Tax and Trade Policies
This week, Senate Republicans voted to codify DOGE’s reckless cuts to the federal budget and claw back funding from critical federal programs, just two weeks after Trump signed into law a tax bill that makes life more expensive for working families while giving billionaires another tax cut.
The effects of Trump’s trade war are coming into focus: this morning’s Preliminary University of Michigan Index of Consumer Sentiment shows that consumers are pulling back due to higher prices and have growing concerns about the state of the economy.
Groundwork Collaborative’s Executive Director Lindsay Owens released the following statement:
“Our economy is wracked with uncertainty as a result of President Trump’s erratic trade policy, but one thing is clear: prices are going up and consumers are pulling back. Inflation data shows that costs are rising on everything from coffee and oranges to appliances and furniture, and consumers are feeling the hit to their pocketbooks. With the Back to School shopping season here and the holidays around the corner, working families are in for a rough second half of the year thanks to Trump’s tax and tariff policies.”
Recently in the Trump Slump, new polling and economic indicators continue to show that President Trump’s actions are deeply unpopular and hurting the economy.
Polling:
- According to recent polls, a majority of voters disapprove of Trump’s handling of the economy:
- A CNN poll conducted by SSRS found roughly 6 in 10 Americans (61%) say they oppose Trump’s tax law.
- A Strength in Numbers poll found that Trump’s approval rating just hit a new low at 42.5%, -11 net among adults.
- A new survey from F&G Annuities & Life reported that 23% of adults over 50 years old are delaying retirement due to economic concerns.
Economic Indicators:
- The Bureau of Labor Statistics reported that headline CPI rose by 2.7% year over year in June. The index for shelter rose 0.2% in June and was the primary factor in the all items monthly increase. Indexes that increased over the month include household furnishings and operations, medical care, recreation, apparel, and personal care.
- The Preliminary University of Michigan Index of Consumer Sentiment print came in little changed from June and remains 16% below December 2024 levels. Consumers’ expectations about their own personal financial outlook fell an additional 4% this past month.
- The Fed’s Beige Book survey for July found: businesses in all 12 regional districts reported “experiencing modest to pronounced input cost pressures related to tariffs, especially for raw materials used in manufacturing and construction… Many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges…”
- The New York State Manufacturing Survey found that while the business conditions index experienced its first positive reading since February, delivery times lengthened and supply availability continued to worsen.
- Builder confidence in the market for newly built single-family homes was 33 in July, down 8 points since July 2024, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. Builder sentiment has now been negative for 15 consecutive months.
- The Producer Price Index showed that final demand goods rose 0.3 percent in June, the largest increase since moving up 0.3 percent in February. The indexes for gasoline; residential electric power; canned, cooked, smoked, or prepared poultry; meats; and tree nuts also moved higher.
Expert Commentary:
- Matthew Graham, Chief Operating Officer at Mortgage News Daily, wrote about total mortgage application volume dropping 10% last week: “We knew there was a possibility of two separate reactions–one for the top line CPI numbers and one for a deeper look at the internal components. Those internals show that tariffs are having an impact even though it was a smaller impact than many forecasters were expecting.”
- Moody’s Chief Economist Mark Zandi posted a thread on X/Twitter about the U.S. housing shortage: “I sent off a yellow flare on the housing market in a post a couple of weeks ago, but I now think a red flare is more appropriate. Home sales, homebuilding, and even house prices are set to slump unless mortgage rates decline materially from their current near 7% soon. That, however, seems unlikely. Home sales are already uber depressed, but homebuilders providing rate buydowns had been propping sales up. They are giving up. It’s simply too expensive. A big tell is that many builders are delaying their land purchases from the land banks. New home sales, starts, and completions will soon fall.”
- Michael Pearce, Deputy Chief U.S. economist at Oxford Economics, spoke about the impact of Trump’s tariffs on prices: “Since the Trump administration began imposing tariffs, the dollar has depreciated, which could lead to a larger pass-through from tariffs to consumer prices. A weaker dollar boosts the likelihood that firms pass on a larger share of tariffs.”
- Following news that a semiconductor manufacturing facility that would create thousands of jobs in Michigan is no longer being built, Governor Gretchen Whitmer said that the company pulled out “because of massive economic uncertainty at the national level” and decided not to move forward with constructing any plants in the United States.
- Laura Rosner-Warburton, an economist at MacroPolicy Perspectives, said of the uncertainty around tariffs and weaker demand from consumers: “Firms are getting squeezed… We’ve heard them say, ‘We’ve paused hiring.’”
- Groundwork Collaborative’s Chief of Policy and Advocacy Alex Jacquez reacted to Senate Republicans voting to approve the Trump administration’s rescissions package, clawing back funding from critical federal programs: “With this vote, Senate Republicans are telling us everything we need to know about their priorities. After passing a tax law that gives a massive giveaway to billionaires and raises costs on working families, Senate Republicans are now codifying DOGE’s deeply unpopular and reckless cuts to vital programs. Once again, Republicans are failing to deliver on the one thing they promised: lower prices. Instead, they’re waging a campaign that will make life more expensive and difficult for working families while lining the pockets of the wealthy.”
